Comcast NBC merger
In December 2009, Comcast announced its intent to acquire a majority stake in the media conglomerate NBC Universal from GE. The planned acquisition was subject to scrutiny from activists and government officials; their concerns primarily surrounded the potential effects of the vertical integration that the merger could create, as Comcast is also heavily involved in cable television and internet services in many media markets. The deal went through, resulting in Comcast owning 51% of the company until March 2013, when GE divested its stake; Comcast now owns 100% of NBC Universal.
After nearly nine months of negotiations, Comcast, the United States’ largest cable operator, announced an agreement on December 3, 2009 to acquire NBCUniversal from General Electric. The deal valued NBCUniversal at around $30 billion. This agreement creates a joint agreement, with Comcast owning 51 percent and General Electric owning 49 percent. Comcast will contribute its stable of cable channels, which includes Versus, the Golf Channel and E Entertainment, worth about $7.25 billion, and will pay General Electric about $6.5 billion in cash, for a total of $13.75 billion. Most of NBCUniversal valued channels consist of USA, Bravo, SyFy, CNBC and MSNBC, and with the Comcast contributions will account for 82 percent of the company’s cash flow.
There are many groups that are against the merger. One of the biggest is the Union representatives. Larry Cohen, president of the Communications Workers of America, which represents some Comcast employees, said the deal would likely mean "the loss of good jobs, the erosion of employee rights, and undermine living standards in the communications and media industries." Cohen said that as of day one there will be $8 billion in new debt that NBC will be taking on and there is going to be a drastic drive to cut costs.
Comcast Chairman Brian Roberts said at earlier Hill hearings that there were no plans for widespread layoffs, pointing out that there is not much overlap in the primarily vertical transaction. In their joint testimony prepared for Thursday's hearing, Roberts and NBCUniversal President Jeff Zucker said the deal would increase investment, since Comcast is focused "exclusively on communications and entertainment" (unlike GE), and that the deal will "preserve and create sustainable media and technology jobs in the U.S."
Jean Prewitt, the president of the Independent Film & Television Alliance, said what was good for Comcast and NBCUniversal in the merger, which she identified as cost-savings and synergies, "is not good for the American public." And she suggested that Comcast's promise of more independent programming might, instead of a field where all flowers bloom, prove to be "a walled and sparsely tended garden." "This is just one more step to vertical integration in the media industry that is going to crush the opportunities for independent programming to reach the public."
There are also great benefits that come from the proposition of this merger. Comcast said it wants to speed up the availability of on demand movies, bringing them closer to the DVD release date. This would be possible by using shortcuts with NBC‘s content. Also, Comcast wants to prove that it won't make a mess of programming that the U.S. Federal Communications Commission (FCC) deems necessary, such as local news, children's shows and Spanish-language content. The cable company promises thousands more hours of programming in all of these categories, to be available through cable, over the air, on-demand and online.
Approval of merger
On January 18, 2011, the FCC and the United States Department of Justice approved the merger.
Divestment by GE
Comcast intended to buy out the rest of GE's stake of NBC Universal over the following seven years. Ownership remained split at 51%–49% for four years. Then, on February 12, 2013, Comcast announced its intention to complete the purchase all at once and assume 100% ownership of the company by the end of March. The acquisition was completed March 19, 2013.
Scale of new company
The Comcast-NBC consolidation expands Comcast both vertically and horizontally within the media market. Vertical integration includes the combination of video producer (NBC) and video distributor (Comcast). Horizontal integration includes adding NBC’s programming, such as Bravo and others to Comcast’s programming, including the Golf channel, E! and others; secondly, adding NBC’s broadcasting station to Comcast’s video network.
Mark Leccese summarizes the huge scale of the new company personally:
“10 TV and movie production studios (including Universal Pictures), 20 cable channels, 11 regional broadcast TV stations, 15 Telemundo stations, 9 regional sports cable networks, one regional news cable station (New England Cable News), a whole bunch of websites, two pro sports teams in Philadelphia and two arenas, a food service vendor, a ticket agency, and four theme parks. And some other stuff.”
Some scholars also summarize and list the significant scale and scope of the new company more completely in their academic journal named The Proposed Comcast-NBCUniversal Combination. This is the integrated-version list.
“Through the merger, Comcast-NBC would control media and entertainment properties including:
- Comcast’s cable systems, which currently serve 24.2 million subscribers, making Comcast the largest multichannel video programming distributor (MVPD) in the United States;
- Comcast’s broadband network, which passes more than 50 million homes and provides high speed Internet service to just under 15 million households, making Comcast the largest residential internet service provider (ISP) in the United States;
- A number of national cable networks, including NBC’s USA, Bravo, CNBC, MSNBC, Oxygen, and Syfy networks and Comcast’s E!, Style, Golf Channel, and Versus networks, as well as minority interests in the A&E, Biography, History Channel, Weather Channel, and Lifetime cable networks, and small interests in the Big Ten, NHL, and MLB cable networks;
- Comcast’s 10 regional cable sports networks;
- The NBC national broadcast television network, including NBC News (a leading source of global and national news with top-rated news programming), NBC Entertainment, and NBCUniversal Sports (The Olympics, NBC Sunday Night Football, NHL/Stanley Cup, the PGA Tour, the U.S. Open, the Ryder Cup, Wimbledon, and the Kentucky Derby);
- NBC’s Telemundo national broadcast television network, the second-largest Spanish language programming network in the United States;
- NBC’s ten owned and operated local broadcast stations, which carry the NBC network programming in large U.S. markets, including New York, Los Angeles, Chicago, and Philadelphia;
- NBC’s 16 owned and operated local broadcast stations, which carry the Telemundo network programming in cities with large Spanish-speaking populations, including Los Angeles, New York, Miami, Houston, Chicago, and Dallas;
- NBCUniversals’s large television production operations, which produce broadcast network programming, NBCUniversal Television Distribution’s broadcast program syndication operations, and a 3,000-title library of television episodes;
- NBCUniversals’s Universal Pictures and Focus Features, which produce theatrical and non-theatrical films, as well as Universal Studio Home Entertainment’s extensive movie library with more than 4,000 titles;
- Digital media properties, including CNBC.com, IVillage, NBC.com, Fandango, and Daily Candy, which together generate more than 40 million unique users each month;
- NBC’s 30% interest in Hulu.com, a website that offers free, advertising supported streaming video of broadcast and cable television programs.”
- 50% stakes in StudioCanal and Canal+ which is the largest pay channel in Europe and holds the third largest film library in the world, along with all distribution rights (outside North America) to the Miramax Films Library
It is certain that the video marketplace has changed structurally with or without Comcast-NBC merger. More and more videos, programs and advertisements are displayed on the Internet, not the traditional media channel, television. The video business model has gradually changed as time goes by. Comcast has reached such a significant scale that it now owns a huge large amount of media and entertainment properties. However, facing the uncertainty of video marketplace, many people proposed their concerns:
A. How Comcast-NBC affects video market
One of the claims is “Comcast Would Be Able to Use its Vertically Integrated Position to Deny Rival Distributors Access to Programming or to Raise the Cost of That Programming”. Comcast-NBC will face two rival distributors – the satellite and telephone company and the new entrant. Of course, both of them are worrying about the domination which Comcast-NBC may be capable of establishing and the entry barrier. The big challenge for the satellite and telephone company is to find a new business model to convince the programmers that their model will benefit them more than Comcast-NBC. However, Comcast-NBC also keeps improving their business model, which is unhappy to the new entrant. The other claim is “Comcast Will Use the Merger to Change NBC into a Cable Network, at the Expense of Local Programming”. Some observers predict that Comcast may convert NBC to a cable network. They think that Comcast must have to make some changes because NBC broadcast station traditionally has only one revenue path, the advertising;
B. How Comcast-NBC affects public policy applied to the range of competition, diversity and localism of media company
As far as media ownership, competition, diversity and localism are the three major topics. Once two or more media company amalgamated, many critics were always suggested immediately, such as the case of merge of News Corp/DirecTV and Sirius-XM. They thought that merger with too much power will harm the competition, diversity of the media marketplace and even the democracy of this country. Some of them directly called it “Merger to Monopoly”. FCC Commissioner Copps once criticized personally, “It will create a single company with enormous influence over politics, art and culture across the nation and especially in the New York metropolitan area.” No doubt localism is also affected by this merger. One obvious change is that the new entity who acts as a gatekeeper will limit the local or independent voices to get to the slots on the media distribution system. Free Press has conveyed this concern, “The new entity will have an incentive to prioritize NBC shows over other local and independent voices and programs, making it even harder to find alternatives on the cable dial.”
C. Whether the merger indeed benefits the shareholders and consumers
One of the claims is “A combined Comcast-NBCUniversal might have the unique ability to craft new business models that benefit consumers.” With the development of new digital technologies to distribute videos, advertising revenues have not been generated in the new market. Therefore, these enterprise operators have to find out a new business model in order to make the revenues financially available. Facing the uncertain environment, the Comcast Senior Vice President for Corporate Development, Robert Pick still shows his determination. He says, “the combination would ameliorate the negotiations friction that had made it difficult for Comcast, primarily a distribution and communications company, to convince content owners and programmers to work with us to create and deliver more content to consumers in a greater variety of ways.”
D. How Comcast-NBC changes the price of video markets
Many observers predict that the price of distributing videos is going to fall dramatically in the near future because three distribution products of Comcast (Broadcast-TV-Internet) are all merging into the network. Wall Street Journal business columnist Holman Jenkins says, “Customers want the product for free. Comcast’s lifeblood, the $100-a-month cable bill and the $50-a-month broadband bill, increasingly look like duplicative expenses. And so on.” In order to recover the lost revenue from content, Comcast-NBC may enhance their business on service of advertising, subscription and etc.
Dick Ebersol, who has run NBC Sports for nearly 22 years starts to reshape the sports programming on Comcast. Ebersol decides to add new roles at Comcast programming. “Our great strength is the programming, production, marketing and relationship orientation of NBC Sports,” Ebersol said after the agreement of combination of Comcast and NBC were announced. He focused on rebranding and developing two programming: NBC’s sports golf programming and Versus.
Ebersol rebranded the NBC’s sports golf programming and renamed it “Golf Channel on NBC”. He said, “It’ll take 18 months to two years to blend more and more talent across the two.” Also, he will probably convert the name of the Versus “somewhere down the road”. Versus would eventually relaunch on January 2, 2012 as the NBC Sports Network.
Ebersol installed and organized the new execution team of the Golf Channel. He has appointed Mike McCarley, a former NBC Sports publicist who is now senior vice president of strategic marketing at NBC Sports, to run the Golf Channel. And he estimated that because McCarley has not run a network before, so probably he could have the marketing skills “to make the Golf Channel go pop.”
At Versus, Ebersol installed a three-man group: Jon Litner as president, Sam Flood as executive producer, and Jon Miller as president of programming.
In the media
Media coverage of the Comcast/NBC merger peaked in late December 2010 and early January 2011, however seemed minimal outside of primary democratic, free-speech advocates such as U.S. Senator Al Franken (a former cast member on NBC's Saturday Night Live). Large media outlets such as CNN and Fox News Channel did cover the merger extensively through web articles; critics were disapproving of the general media's lack of televised coverage for the event.
In popular media
The TV series 30 Rock has parodied the merger. 30 Rock is produced by and appears on NBC, previously owned by GE; it is set at NBCUniversal's headquarters at 30 Rockefeller Plaza and centers on the cast and crew of a fictional NBC sketch show and several other NBC employees. Seasons four and five of the show (2009-2011) depicted the fictitious Philadelphia-based cable company Kabletown acquiring NBC from GE. The episode in which the fictitious merger occurred aired on the day that Comcast executive Steve Burke met with his new NBC employees, which they viewed as the unofficial sign that the takeover had occurred.
During the decision making process, the FCC was concerned with two major factors. The first being AOL's risk of becoming a monopoly and thus reducing market freedom; and, the concern that Time Warner content holdings will be favored over other websites through price discrimination.
Similar issues are questioned with the Comcast and NBC merger, especially the concerns with net neutrality and price discrimination. After the merger, the new company began to experience large decreases in revenue. By 2003, "AOL" was dropped from the company name. Finally, in 2009, Time Warner spun AOL off into a separate company. Time Warner itself will cease to exist sometime in 2014 when publishing assets (Time, Sports Illustrated, People, etc.) will be spun off into a separate company called Time Inc.
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